Exhibit 2(h)
Xxxxx & Steers Quality Income Realty Fund, Inc.
(a Maryland corporation)
Taxable Auction Market Preferred Shares ("AMPS")
[___] Shares [___]% AMPS, Series M7
Liquidation Preference $25,000 per share
PURCHASE AGREEMENT
November [__], 2004
Xxxxxxx Xxxxx & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Citigroup Global Markets Inc.
X.X. Xxxxxxx & Sons, Inc.
UBS Securities LLC
Wachovia Capital Markets, LLC
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Xxxxx & Steers Quality Income Realty Fund, Inc., a Maryland
corporation (the "Fund"), proposes, upon the terms and conditions set forth
herein, to issue and sell an aggregate of [____] shares of its Taxable Auction
Market Preferred Shares, Series M7, with a liquidation preference of $25,000 per
share (the "AMPS"). The AMPS will be authorized by, and subject to the terms and
conditions of, the Articles of Incorporation of the Fund, as amended through
January 15, 2002 (the "Charter"), in the form filed as an exhibit to the
Registration Statement referred to in the second following paragraph of this
Agreement, as the same may be amended from time to time. The Fund and the Fund's
investment manager, Xxxxx & Steers Capital Management, Inc., a New York
corporation ("CSCM" or the "Investment Manager") each confirms its agreement
with Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
("Xxxxxxx Xxxxx") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Xxxxxxx
Xxxxx is acting as representative (in such capacity, the "Representative"), with
respect to the issue and sale by the Fund and the purchase by the Underwriters,
acting severally and not jointly, of the respective number of AMPS set forth in
said Schedule A.
The Fund understands that the Underwriters propose to make a public
offering of the AMPS as soon as the Representative deems advisable after this
Agreement has been executed and delivered. The Fund has filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form N-2 (No. 333-119361 and No. 811-10481) covering the registration of the
AMPS under the Securities Act of 1933, as amended (the "1933 Act"), including
the related preliminary prospectus or prospectuses, and a notification on Form
N-8A of registration (the "1940 Act Notification") of the Fund as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations of the Commission under the 1933 Act and the 1940
Act (the "Rules and Regulations"). Promptly after execution and delivery of this
Agreement, the Fund will either (i) prepare and file a prospectus in accordance
with the provisions of Rule 430A ("Rule 430A") of the Rules and Regulations and
paragraph (c) or (h) of Rule 497 ("Rule 497") of the Rules and Regulations or
(ii) if the Fund has elected to rely upon Rule 434 ("Rule 434") of the Rules and
Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
497. The information included in any such prospectus or in any such Term Sheet,
as the case may be, that was omitted from such registration statement at the
time it became effective but that is deemed to be part of such registration
statement at the time it became effective, if applicable, (a) pursuant to
paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b)
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information."
Each prospectus used before such registration statement became effective, and
any prospectus that omitted, as applicable, the Rule 430A Information or the
Rule 434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, including in each case any Statement
of Additional Information incorporated therein by reference, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the Rules and Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final
prospectus in the form first furnished to the Underwriters for use in connection
with the offering of the AMPS, including the Statement of Additional Information
incorporated therein by reference, is herein called the "Prospectus." If Rule
434 is relied on, the term "Prospectus" shall refer to the preliminary
prospectus dated November [________], 2004 together with the Term Sheet and all
references in this Agreement to the date of the Prospectus shall mean the date
of the Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any Term
Sheet or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("XXXXX").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all reference in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the "1934
Act"), which is incorporated by reference in the Registration Statement, such
preliminary prospectus or the Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Fund and the Investment
Manager. The Fund and the Investment Manager jointly and severally represent and
warrant to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof and agree with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act, or order of
suspension or revocation of registration pursuant to Section 8(e) of
the 1940 Act, and no proceedings for any such purpose have been
instituted or are pending or, to the knowledge of the Fund or the
Investment Manager, are contemplated by the Commission, and any
request on the part of the Commission for additional information has
been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time, the Registration
Statement, the Rule 462(b) Registration Statement, the notification of
Form N-8A and any amendments and supplements thereto complied and will
comply in all material
2
respects with the requirements of the 1933 Act, the 1940 Act and the
Rules and Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or
supplement was issued and at the Closing Time, included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading (except that this representation and warranty does not
apply to statements in or omissions from the Registration Statements
or the Prospectus made in reliance upon and in conformity with
information relating to the Underwriters furnished to the Fund by or
on behalf of the Underwriters expressly for use therein). If Rule 434
is used, the Fund will comply with the requirements of Rule 434 and
the Prospectus shall not be "materially different", as such term is
used in Rule 434, from the prospectus included in the Registration
Statement at the time it became effective.
Each preliminary prospectus and the prospectus filed as part of
the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 497 under the 1933 Act,
complied when so filed in all material respects with the Rules and
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to XXXXX, except to the extent permitted
by Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection
with the offering and sale of the AMPS, the Fund has complied or will
comply with the requirements of Rule 111 under the 1933 Act
Regulations relating to the payment of filing fees thereof.
(ii) Independent Registered Public Accounting Firm. The
Independent Registered Public Accounting Firm, PricewaterhouseCoopers
LLP, who has audited and certified or shall audit and certify the
December 31, 2003 financial statements included or incorporated by
reference in the Registration Statement and the Prospectus (or any
amendment or supplement to either of them) is an independent
registered public accounting firm as required by the 1933 Act, the
1940 Act and the Rules and Regulations.
(iii) Financial Statements. The financial statements, together
with related schedules and notes, included or incorporated by
reference in the Registration Statement and the Prospectus (and any
amendment or supplement to either of them), present fairly the
financial position, results of operations and changes in financial
position of the Fund on the basis stated or incorporated by reference
in the Registration Statement and the Prospectus at the respective
dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein;
and the other financial and statistical information and data included
in the Registration Statement and the Prospectus (and any amendment or
supplement to either of them) are accurately presented and prepared on
a basis consistent with such financial statements and the books and
records of the Fund.
(iv) No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or
in the earnings, business affairs or business prospects (other than as
a result of a change in the financial markets generally) of the Fund,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) there have been no transactions entered into by
the Fund, other
3
than those in the ordinary course of business, which are material with
respect to the Fund, and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Fund on any
class of its capital stock.
(v) Good Standing of the Fund. The Fund has been duly organized
and is validly existing as a corporation in good standing under the
laws of the State of Maryland and has the corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Fund is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be
in good standing would not result in a Material Adverse Effect.
(vi) No Subsidiaries. The Fund has no subsidiaries.
(vii) Investment Company Status. The Fund is duly registered with
the Commission under the 1940 Act as a closed-end non-diversified
management investment company, and to the Fund's knowledge, no order
of suspension or revocation of such registration has been issued or
proceedings therefor initiated or threatened by the Commission.
(viii) Officers and Directors. No person is serving or acting as
an officer, director or investment manager of the Fund except in
accordance with the provisions of the 1940 Act and the Rules and
Regulations and the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and the rules and regulations of the Commission
promulgated under the Advisers Act (the "Advisers Act Rules and
Regulations"). Except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement to either of them), no
director of the Fund is an "interested person" (as defined in the 1940
Act) of the Fund or an "affiliated person" (as defined in the 1940
Act) of any Underwriter listed in Schedule A hereto.
(ix) Capitalization. The authorized, issued and outstanding
shares of common stock of the Fund is as set forth in the Prospectus
as of the date thereof under the caption "Description of Common
Shares." All issued and outstanding common shares of the Fund have
been duly authorized and validly issued and are fully paid and
non-assessable, and have been offered and sold or exchanged by the
Fund in compliance with all applicable laws (including, without
limitation, federal and state securities laws); none of the
outstanding shares of common shares of the Fund was issued in
violation of the preemptive or other similar rights of any
securityholder of the Fund.
(x) Authorization and Description of AMPS. The AMPS to be
purchased by the Underwriters from the Fund have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement
and, when issued and delivered by the Fund pursuant to this Agreement
against payment of the consideration set forth herein, will be validly
issued and fully paid and non-assessable. The AMPS conform to all
statements relating thereto contained in the Prospectus and such
description conforms to the rights of holders of AMPS set forth in the
Charter and other documents defining the same; no holder of the AMPS
will be subject to personal liability by reason of being such a
holder; and the issuance of the AMPS is not subject to the preemptive
or other similar rights of any securityholder of the Fund.
(xi) Absence of Defaults and Conflicts. The Fund is not in
violation of its Charter or by-laws, or in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to
which it is a party or by which it may be bound, or to which any of
the property or assets of the Fund is subject (collectively,
"Agreements and
4
Instruments") except for such violations or defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement, the Investment Management Agreement,
the Administration Agreement, the Sub-Administration Agreement, the
Custodian Agreement, the Transfer Agent and Service Agreement and the
Auction Agency Agreement referred to in the Registration Statement (as
used herein, the "Management Agreement," the "Administration
Agreement," the "Sub-Administration Agreement," the "Custodian
Agreement," the "Transfer Agency Agreement" and the "Auction Agency
Agreement," respectively) and the consummation of the transactions
contemplated herein and in the Registration Statement (including the
issuance and sale of the AMPS and the use of the proceeds from the
sale of the AMPS as described in the Prospectus under the caption "Use
of Proceeds") and compliance by the Fund with its obligations
hereunder have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or constitute a breach of,
or default or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Fund pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the
provisions of the Charter or by-laws of the Fund or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Fund or any of its assets, properties or
operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment
of all or a portion of such indebtedness by the Fund.
(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Fund or the Investment Manager, threatened,
against or affecting the Fund, which is required to be disclosed in
the Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely
affect the properties or assets of the Fund or the consummation of the
transactions contemplated in this Agreement or the performance by the
Fund of its obligations hereunder. The aggregate of all pending legal
or governmental proceedings to which the Fund is a party or of which
any of its property or assets is the subject which are not described
in the Registration Statement, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result
in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits thereto by the 1933 Act, the
1940 Act or by the Rules and Regulations which have not been so
described and filed as required.
(xiv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Fund of its
obligations hereunder, in connection with the offering, issuance or
sale of the AMPS hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been already
obtained or as may be required under the 1933 Act, the 1940 Act, the
1934 Act, or state securities laws.
5
(xv) Possession of Licenses and Permits. The Fund possesses such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies
necessary to operate its properties and to conduct the business as
contemplated in the Prospectus; the Fund is in compliance with the
terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid
and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to
be in full force and effect would not have a Material Adverse Effect;
and the Fund has not received any notice of proceedings relating to
the revocation or modification of any such Governmental Licenses
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse
Effect.
(xvi) Advertisements. Any advertising, sales literature or other
promotional material (including "prospectus wrappers," "broker kits,"
"road show slides" and "road show scripts") authorized in writing by
or prepared by the Fund or the Investment Manager used in connection
with the public offering of the AMPS (collectively, "sales material")
does not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading. Moreover, all sales
material complied and will comply in all material respects with the
applicable requirements of the 1933 Act, the 1940 Act, the Rules and
Regulations and the rules and interpretations of the National
Association of Securities Dealers, Inc. ("NASD").
(xvii) Subchapter M. The Fund intends to direct the investment of
the proceeds of the offering described in the Registration Statement
in such a manner as to comply with the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended ("Subchapter M of the
Code" and the "Code," respectively), and intends to qualify as a
regulated investment company under Subchapter M of the Code.
(xviii) Distribution of Offering Materials. The Fund has not
distributed and, prior to the later to occur of (A) the Closing Time
and (B) completion of the distribution of the AMPS, will not
distribute any offering material in connection with the offering and
sale of the AMPS other than the Registration Statement, a preliminary
prospectus, the Prospectus or other materials, if any, permitted by
the 1933 Act or the 1940 Act or the Rules and Regulations.
(xix) Accounting Controls. The Fund maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization and with the applicable
requirements of the 1940 Act, the Rules and Regulations and the Code;
(B) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets and to maintain
compliance with the books and records requirements under the 1940 Act
and the Rules and Regulations; (C) access to assets is permitted only
in accordance with the management's general or specific authorization;
and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xx) Absence of Undisclosed Payments. To the Fund's knowledge,
neither the Fund nor any employee or agent of the Fund has made any
payment of funds of the Fund or received or retained any funds, which
payment, receipt or retention of funds is of a character required to
be disclosed in the Prospectus.
(xxi) Material Agreements. This Agreement, the Management
Agreement, the Administration Agreement, the Sub-Administration
Agreement, the Custodian Agreement, the
6
Transfer Agency Agreement and the Auction Agency Agreement have each
been duly authorized by all requisite action on the part of the Fund,
executed and delivered by the Fund, as of the dates noted therein and
each complies with all applicable provisions of the 1940 Act. Assuming
due authorization, execution and delivery by the other parties thereto
with respect to the Management Agreement, the Administration
Agreement, the Sub-Administration Agreement, the Custodian Agreement,
the Transfer Agency Agreement and the Auction Agency Agreement, each
of the Management Agreement, the Administration Agreement, the
Sub-Administration Agreement, the Custodian Agreement, the Transfer
Agency Agreement and the Auction Agency Agreement constitutes a valid
and binding agreement of the Fund, enforceable in accordance with its
terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law).
(xxii) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Fund under the 1933 Act.
(xxiii) NYSE Listing. The Fund's shares of common stock are duly
listed on the New York Stock Exchange ("NYSE").
(xxiv) Ratings. The AMPS have been, or prior to the Closing Date
will be, assigned a rating of "Aaa" by Xxxxx'x Investors Service, Inc.
("Moody's") and "AAA" by Standard & Poor's Rating Services ("S&P").
(xxv) Leverage. The Fund has no liability for borrowed money,
including under any reverse repurchase agreement.
(b) Representations and Warranties by the Investment Manager. The
Investment Manager represents and warrants to each Underwriter as of the date
hereof, as of the Closing Time referred to in Section 2(c) hereof as follows:
(i) Good Standing of the Investment Manager. The Investment
Manager has been duly organized and is validly existing and in good
standing as a corporation under the laws of the State of New York with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus
and is duly qualified as a foreign corporation to transact business
and is in good standing in each other jurisdiction in which such
qualification is required except where the failure so to register or
to qualify does not have a material adverse effect on the condition
(financial or other), business, business prospects, properties, net
assets or results of operations of the Investment Manager to perform
its obligations under this Agreement and the Management Agreement.
(ii) Investment Manager Status. The Investment Manager is duly
registered and in good standing with the Commission as an investment
adviser under the Advisers Act, and is not prohibited by the Advisers
Act or the 1940 Act, or the rules and regulations under such acts,
from acting under the Management Agreement for the Fund as
contemplated by the Prospectus.
(iii) Description of Investment Manager. The description of the
Investment Manager in the Registration Statement and the Prospectus
(and any amendment or supplement to either of them) complied and
comply in all material respects with the provisions of the 1933 Act,
the 1940 Act, the Advisers Act, the Rules and Regulations and the
Advisers Act Rules and Regulations and is true and correct and does
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading.
7
(iv) Capitalization. The Investment Manager has the financial
resources available to it necessary for the performance of its
services and obligations as contemplated in the Prospectus, this
Agreement and under the Management Agreement.
(v) Authorization of Agreements; Absence of Defaults and
Conflicts. This Agreement and the Management Agreement have each been
duly authorized, executed and delivered by the Investment Manager, and
the Management Agreement constitutes a valid and binding obligation of
the Investment Manager, enforceable in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law); and neither
the execution and delivery of this Agreement or the Management
Agreement nor the performance by the Investment Manager of its
obligations hereunder or thereunder will conflict with, or result in a
breach of any of the terms and provisions of, or constitute, with or
without the giving of notice or lapse of time or both, a default
under, any agreement or instrument to which the Investment Manager is
a party or by which it is bound, the certificate of incorporation, the
by-laws or other organizational documents of the Investment Manager,
or to the Investment Manager's knowledge, by any law, order, decree,
rule or regulation applicable to it of any jurisdiction, court,
federal or state regulatory body, administrative agency or other
governmental body, stock exchange or securities association having
jurisdiction over the Investment Manager or its respective properties
or operations; and no consent, approval, authorization or order of any
court or governmental authority or agency is required for the
consummation by the Investment Manager of the transactions
contemplated by this Agreement or the Management Agreement, except as
have been obtained or may be required under the 1933 Act, the 1940
Act, the 1934 Act or state securities laws.
(vi) No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, there has not occurred
any event which should reasonably be expected to have a material
adverse effect on the ability of the Investment Manager to perform its
obligations under this Agreement and the Management Agreement.
(vii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Investment Manager, threatened against or
affecting the Investment Manager or any "affiliated person" of the
Investment Manager (as such term is defined in the 1940 Act) or any
partners, directors, officers or employees of the foregoing, whether
or not arising in the ordinary course of business, which might
reasonably be expected to result in any material adverse change in the
condition, financial or otherwise, or earnings, business affairs or
business prospects of the Investment Manager, materially and adversely
affect the properties or assets of the Investment Manager or
materially impair or adversely affect the ability of the Investment
Manager to function as an investment manager or perform its
obligations under the Management Agreement, or which is required to be
disclosed in the Registration Statement and the Prospectus.
(viii) Absence of Violation or Default. The Investment Manager is
not in violation of its certificate of incorporation, by-laws or other
organizational documents or in default under any agreement, indenture
or instrument except for such violations or defaults that would not
result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of the Investment Manager or the Fund.
(c) Officer's Certificates. Any certificate signed by any officer of
the Fund or the Investment Manager delivered to the Representative or to counsel
for the Underwriters shall be deemed a
8
representation and warranty by the Fund or the Investment Manager, as the case
may be, to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) AMPS. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Fund
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in Schedule B, the number of AMPS set forth in
Schedule A opposite the name of such Underwriter, plus any additional number of
AMPS which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) Commission. The Fund agrees to pay to the Underwriters a
commission set forth in Schedule B as compensation to the Underwriters for their
commitments under this Agreement.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the AMPS shall be made at the offices of Xxxxxxx Xxxxxxx &
Xxxxxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
place as shall be agreed upon by the Representative and the Fund, at 10:00 A.M.
(Eastern time) on the business day after the date hereof (unless postponed in
accordance with the provisions of Section 10), or such other time not later than
ten business days after such date as shall be agreed upon by the Representative
and the Fund (such time and date of payment and delivery being herein called
"Closing Time").
Payment shall be made to the Fund by wire transfer of immediately
available funds to a bank account designated by the Fund, against delivery to
the Representative for the respective accounts of the Underwriters of
certificates for the AMPS to be purchased by them. It is understood that each
Underwriter has authorized the Representative, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the AMPS
which it has agreed to purchase. Xxxxxxx Xxxxx, individually and not as
representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price for the AMPS to be purchased by any Underwriter
whose funds have not been received by the Closing Time but such payment shall
not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the AMPS shall be in
such denominations and registered in such names as the Representative may
request in writing at least one full business day before the Closing Time. The
certificates for the AMPS will be made available for examination and packaging
by the Representative in the City of New York not later than 10:00 A.M. (Eastern
time) on the business day prior to the Closing Time.
SECTION 3. Covenants.
(a) The Fund and the Investment Manager, jointly and severally,
covenant with each Underwriter as follows:
(i) Compliance with Securities Regulations and Commission
Requests. The Fund, subject to Section 3(a)(ii), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Representatives immediately, and confirm the notice in writing,
(i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any
amended Prospectus shall have been filed, (ii) of the receipt of any
comments from the Commission, (iii) of any request by the Commission
for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, and (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the
9
AMPS for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Fund will
promptly effect the filings necessary pursuant to Rule 497 and will
take such steps as it deems necessary to ascertain promptly whether
the form of prospectus transmitted for filing under Rule 497 was
received for filing by the Commission and, in the event that it was
not, it will promptly file such prospectus. The Fund will make every
reasonable effort to prevent the issuance of any stop order, or order
of suspension or revocation of registration pursuant to Section 8(e)
of the 1940 Act, and, if any such stop order or order of suspension or
revocation of registration is issued, to obtain the lifting thereof at
the earliest possible moment.
(ii) Filing of Amendments. The Fund will give the Representative
notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any
Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it
became effective or to the Prospectus, will furnish the Representative
with copies of any such documents a reasonable amount of time prior to
such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representative or counsel for the
Underwriters shall object.
(iii) Delivery of Registration Statements. The Fund has furnished
or will deliver to the Representative and counsel for the
Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will
also deliver to the Representative, without charge, a conformed copy
of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The
copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to
XXXXX, except to the extent permitted by Regulation S-T.
(iv) Delivery of Prospectuses. The Fund has delivered to each
Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Fund
hereby consents to the use of such copies for purposes permitted by
the 1933 Act prior to the date of the Prospectus. The Fund will
furnish to each Underwriter, without charge, during the period when in
the opinion of counsel for the Underwriter the Prospectus is required
under the 1933 Act to be delivered in connection with sales by any
Underwriter or dealer or the 1934 Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements
thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to XXXXX, except to the extent permitted by Regulation S-T.
(v) Continued Compliance with Securities Laws. If at any time
when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the AMPS, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of
counsel for the Underwriters or for the Fund, to amend the
Registration Statement or amend or supplement the Prospectus in order
that the Prospectus will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the opinion of such counsel, at any such
time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or
the Rules and Regulations, the Fund will promptly prepare and file
with the Commission, subject to Section 3(a)(ii), such amendment or
supplement as may be necessary to correct such
10
statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Fund will furnish to
the Underwriters such number of copies of such amendment or supplement
as the Underwriters may reasonably request.
(vi) Blue Sky Qualifications. The Fund will use its best efforts,
in cooperation with the Underwriters, to qualify the AMPS for offering
and sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Representative may designate
and to maintain such qualifications in effect for a period of not less
than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided,
however, that the Fund shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation
or as a dealer in AMPS in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
In each jurisdiction in which the AMPS have been so qualified, the
Fund will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for
a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.
(vii) Rule 158. The Fund will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement
for the purposes of, and to provide the benefits contemplated by, the
last paragraph of Section 11(a) of the 1933 Act.
(viii) Use of Proceeds. The Fund will use the net proceeds
received by it from the sale of the AMPS in the manner specified in
the Prospectus under "Use of Proceeds."
(ix) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1940 Act and the 1934 Act within the time periods
required by the 1940 Act and the Rules and Regulations and the 1934
Act and the rules and regulations of the Commission thereunder,
respectively.
(x) Subchapter M. The Fund will comply with the requirements of
Subchapter M of the Code to qualify as a regulated investment company
under the Code.
(xi) No Manipulation of Market for AMPS. The Fund will not (a)
take, directly or indirectly, any action designed to cause or to
result in, or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Fund
to facilitate the sale or resale of the AMPS, and (b) until the
Closing Date, or the Date of Delivery, if any, (i) sell, bid for or
purchase the AMPS or pay any person any compensation for soliciting
purchases of the AMPS or (ii) pay or agree to pay to any person any
compensation for soliciting another to purchase any other Shares of
the Fund.
(xii) Rule 462(b) Registration Statement. If the Fund elects to
rely upon Rule 462(b), the Fund shall file a Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) by 10:00
P.M., Washington, D.C. time, on the date of this Agreement, and the
Fund shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the 1933 Act.
(xiii) Accountant's Certificate. The Fund will furnish to the
Underwriters, on the date on which delivery is made to the Rating
Agencies, the Accountant's Certificate (as defined in the Charter)
corresponding to the Certificate of Dividend Coverage and Certificate
of Eligible Asset Coverage (as defined in the Charter) for the first
Valuation Date (as defined in the Charter)
11
following the Closing Time for which an Accountant's Certificate is
delivered to the Rating Agencies.
(b) Except as provided in this Agreement, the Fund will not sell,
contract to sell or otherwise dispose of any of its preferred shares of
beneficial interest of the same series as the AMPS or any securities convertible
into or exercisable or exchangeable for its preferred shares of beneficial
interest of the same series as the AMPS, or grant any options or warrants to
purchase its preferred shares of beneficial interest of the same series as the
AMPS, for a period of 180 days after the date of the Prospectus, without the
prior written consent of Xxxxxxx Xxxxx.
SECTION 4. Payment of Expenses.
(a) Expenses. The Fund will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the AMPS, (iii) the preparation, issuance and delivery of the certificates
for the AMPS to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
AMPS to the Underwriters, (iv) the fees and disbursements of the Fund's counsel,
accountants and other advisors, (v) the qualification of the AMPS under
securities laws in accordance with the provisions of Section 3(a)(vi) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus,
Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the AMPS, (ix) the fees and expenses incurred in connection with
the rating of the AMPS and (x) the printing of any sales material.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Fund and the Investment Manager, jointly and severally, agree that
they shall reimburse the Underwriters for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters hereunder are subject to
the accuracy of the representations and warranties of the Fund and the
Investment Manager contained in Section 1 hereof or in certificates of any
officer of the Fund or the Investment Manager delivered pursuant to the
provisions hereof, to the performance by the Fund and the Investment Manager of
their respective covenants and other obligations hereunder, and to the following
further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act, no notice or
order pursuant to Section 8(e) of the 1940 Act shall have been issued, and no
proceedings with respect to either shall have been initiated or threatened by
the Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the Underwriters. A prospectus containing the Rule 430A Information
shall have been filed with the Commission in accordance with Rule 497 (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of
12
Rule 430A) or, if the Fund has elected to rely upon Rule 434, a Term Sheet shall
have been filed with the Commission in accordance with Rule 497.
(b) Opinion of Counsel for Fund and the Investment Manager. At Closing
Time, the Representative shall have received the favorable opinions, dated as of
Closing Time, of Xxxxxxx Xxxxxxx & Xxxxxxxx LLP, counsel for the Fund, and of
Xxxxxxxx X. Xxxxxxx, Esq., internal counsel for the Investment Manager, in form
and substance satisfactory to counsel for the Underwriters, together with signed
or reproduced copies of such letters for each of the other Underwriters
substantially to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Underwriters may reasonably request. Insofar as the
opinions expressed above relate to or are dependant upon matters governed by
Maryland law, Xxxxxxx Xxxxxxx & Xxxxxxxx LLP will be permitted to rely on the
opinion of Xxxxxxx LLP.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance US LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (A) (1), (3) through (7),
inclusive and (11) (solely as to the information in the Prospectus under
"Description of AMPS") of Exhibit A hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than the
law of the State of New York and the federal law of the United States, upon the
opinions of counsel satisfactory to the Representative. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Fund and
certificates of public officials.
(d) Officers' Certificates. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Fund, whether or not arising in the ordinary course of
business, and the Representative shall have received a certificate of a duly
authorized officer of the Fund and of the chief financial or chief accounting
officer of the Fund and of the President or a Vice President or Managing
Director of the Investment Manager, dated as of Closing Time, to the effect that
(i) there has been no such material adverse change, (ii) the representations and
warranties in Sections 1(a) and (b) hereof are true and correct with the same
force and effect as though expressly made at and as of Closing Time, (iii) each
of the Fund and the Investment Manager, respectively, has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to Closing Time, (iv) with respect to the Investment Manager only,
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Investment Manager, whether or not arising in the ordinary course of business
and (v) to the knowledge of such officers, no stop order suspending the
effectiveness of the Registration Statement, or order of suspension or
revocation of registration pursuant to Section 8(e) of the 1940 Act, has been
issued and no proceedings for any such purpose have been instituted or are
pending or are contemplated by the Commission.
(e) Independent Registered Public Accounting Firm's Comfort Letter. At
the time of the execution of this Agreement, the Representatives shall have
received from PricewaterhouseCoopers LLP a letter dated such date, in form and
substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the other Underwriters containing
statements and information to the effect that:
(i) They are an independent registered public accounting firm
with respect to the Fund within the meaning of the 1933 Act and 1940
Act, and the applicable rules and regulations thereunder adopted by
the Commission;
(ii) In their opinion, the financial statements of the Fund
audited by them and included in the Registration Statement comply as
to form in all material respects with the applicable
13
accounting requirements of the 1933 Act and 1940 Act and the related
rules and regulations adopted by the Commission;
(iii) On the basis of procedures (but not an audit in accordance
with the standards of the Public Accounting Oversight Board (United
States)) consisting of:
a. Reading the minutes of meetings of the Board of Directors of
the Fund as set forth in the minute books through a
specified date not more than three business days prior to
the date of delivery of such letter;
b. Performing procedures specified by the American Institute of
Certified Public Accountants for a review of interim
financial information as described in SAS 100, Interim
Financial Information, on the unaudited financial statements
of the Fund included in the Registration Statement and
reading the unaudited interim financial data for the period
from the date of the latest statement of assets and
liabilities included in the Registration Statement to the
date of the latest available interim financial data; and
c. Making inquiries of certain officials of the Fund who have
responsibility for financial and accounting matters
regarding changes in the capital stock, net assets or long
term liabilities of the Fund as compared with the amounts
shown in the latest balance sheet included in the
Registration Statement or for the period from the date of
the latest income statement included in the Registration
Statement to a specified date not more than three business
days prior to the delivery of such letter.
Nothing has come to their attention as a result of the foregoing
procedures that caused them to believe that:
d. The unaudited interim financial statements, included in the
Registration Statement, do not comply as to form in all
material respects with the applicable accounting
requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations;
e. Any material modifications should be made to the unaudited
interim financial statements, included in the Registration
Statement, for them to be in conformity with generally
accepted accounting principles;
f. At the date of the latest available interim financial data
and at a specified date not more than three business days
prior to the date of delivery of such letter, there were any
changes in the total assets, total liabilities, net assets
and common shares outstanding of the Fund as compared with
the amounts shown in the latest balance sheet included in
the Registration Statement.
(iv) The letter shall also state that the information set forth
under the captions "Prospectus Summary - The Fund," "Prospectus
Summary - Asset Maintenance," "Financial Highlights," "The Fund,"
"Capitalization (Unaudited)" and "Description of AMPS - Rating Agency
Guidelines" which is expressed in dollars (or percentages derived from
such dollar amounts) and has been obtained from accounting records
which are subject to controls over financial reporting or which has
been derived directly from such accounting records by analysis or
computation, is in agreement with such records or computations made
therefrom, and such other procedures as the Representative may request
and PricewaterhouseCoopers LLP are willing to perform and report upon.
14
(f) Bring-down Comfort Letter. At Closing Time, the Representative
shall have received from PricewaterhouseCoopers LLP a letter, dated as of
Closing Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(g) Rating. The Fund shall have delivered and you shall have received
evidence satisfactory to you that the AMPS are rated 'Aaa' by Xxxxx'x and 'AAA'
by S&P as of the Closing Date, and there shall not have been given any notice of
any intended or potential downgrading, or of any review for a potential
downgrading, in the rating accorded to the AMPS or any other securities issued
by the Fund, by Xxxxx'x or by S&P.
(h) Asset Coverage. As of the Closing Date and assuming the receipt of
the net proceeds from the sale of the AMPS, the 1940 Act Preferred Shares Asset
Coverage and the Preferred Shares Basic Maintenance Amount (each as defined in
the Charter) each will be met.
(i) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the AMPS as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Fund and the Investment Manager in connection with the organization
and registration of the Fund under the 1940 Act and the issuance and sale of the
AMPS as herein contemplated shall be satisfactory in form and substance to the
Representative and counsel for the Underwriters.
(j) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representative by notice to the Fund at any
time at or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7, 8 and 13 shall survive any such termination and
remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Fund and the Investment
Manager, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(e) below) any such
settlement is effected with the written consent of the Fund; and
15
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Xxxxxxx
Xxxxx), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund or the
Investment Manager by any Underwriter through Xxxxxxx Xxxxx expressly for use in
the Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); provided,
however, that the indemnification contained in this paragraph (a) with respect
to any preliminary prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) on account of any
such loss, claim, damage, liability or expense arising from the sale of the AMPS
by such Underwriter to any person if the Fund sustains the burden of proof that
a copy of the Prospectus has not been delivered or sent by the Underwriters as
required to such person within the time required by the 1933 Act and the Rules
and Regulations, and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such preliminary
prospectus was corrected in such Prospectus.
(b) Indemnification of Fund, Investment Manager, Directors and
Officers. Each Underwriter severally agrees to indemnify and hold harmless the
Fund and the Investment Manager, their respective directors, each of the Fund's
officers who signed the Registration Statement, and each person, if any, who
controls the Fund or the Investment Manager within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Fund or the Investment
Manager by such Underwriter through Xxxxxxx Xxxxx expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
(c) Indemnification for Marketing Materials. In addition to the
foregoing indemnification, the Fund and the Investment Manager also, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section 6(a),
as limited by the proviso set forth therein, with respect to any sales material.
(d) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 6(a)
above, counsel to the indemnified parties shall be selected by Xxxxxxx Xxxxx,
and, in the case of parties indemnified pursuant to Section 6(b) above, counsel
to the indemnified parties shall be selected by the Fund and the Investment
Manager. An indemnifying party may participate at its own expense in the
16
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution.
If the indemnification provided for in Section 6 hereof is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Fund and the Investment Manager on
the one hand and the Underwriters on the other hand from the offering of the
AMPS pursuant to this Agreement or (ii) if the allocation provided by clause (i)
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Fund and the Investment Manager on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Fund and the Investment Manager
on the one hand and the Underwriters on the other hand in connection with the
offering of the AMPS pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
AMPS pursuant to this Agreement (before deducting expenses) received by the Fund
and the total underwriting discount received by the Underwriters (whether from
the Fund or otherwise), in each case as set forth on the cover of the
Prospectus, or, if Rule 434 is used, the corresponding location on the Term
Sheet, bear to the aggregate initial public offering price of the AMPS as set
forth on such cover.
The relative fault of the Fund and the Investment Manager on the one
hand and the Underwriters on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Fund or the Investment Manager or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
17
The Fund, the Investment Manager and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the AMPS underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Fund and each director of the Investment Manager,
respectively, each officer of the Fund who signed the Registration Statement,
and each person, if any, who controls the Fund or the Investment Manager, within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Fund and the Investment Manager,
respectively. The Underwriters' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Shares set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery.
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Fund or the Investment Manager
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Fund or the Investment Manager,
and shall survive delivery of the AMPS to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Fund, at any time at or prior to Closing Time (i) if
there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Fund or the Investment
Manager, whether or not arising in the ordinary course of business, or (ii) if
there has occurred any material adverse change in the financial markets in the
United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representative, impracticable or
inadvisable to market the AMPS or to enforce contracts for the sale of the AMPS,
or (iii) if trading in the shares of common stock of the Fund has been suspended
or materially limited by the Commission or the NYSE, or if trading generally on
the American Stock Exchange or the NYSE or in the Nasdaq National Market has
been suspended or materially limited, or minimum or maximum prices for trading
have been fixed, or maximum ranges for
18
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the NASD or any other governmental authority, or a
material disruption has occurred in commercial banking or securities settlement
or clearance services in the United States, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7, 8 and 13 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters.
If one or more of the Underwriters shall fail at Closing Time or a
Date of Delivery to purchase the AMPS which it or they are obligated to purchase
under this Agreement (the "Defaulted AMPS"), the Representative shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted AMPS in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representative shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted AMPS does not exceed 10% of the number
of AMPS to be purchased on such date, each of the non-defaulting Underwriters
shall be obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted AMPS exceeds 10% of the number of AMPS
to be purchased on such date, this Agreement shall terminate without liability
on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representative or the Fund shall have
the right to postpone Closing Time for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. Tax Disclosure.
Notwithstanding any other provision of this Agreement, from the
commencement of discussions with respect to the transactions contemplated
hereby, the Fund and the Investment Manager (and each employee, representative
or other agent of the Fund) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure (as such terms are
used in Sections 6011, 6111 and 6112 of the U.S. Code and the Treasury
Regulations promulgated thereunder) of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided relating to such tax treatment and tax structure.
SECTION 12. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/x Xxxxxxx Xxxxx & Co., 4 World Financial Center, New York, New
York 10080, attention of Equity Capital Markets; and notices to the Fund or the
Investment Manager shall be directed, as appropriate, to the office of Xxxxx &
Steers Capital Management, Inc. at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxxxx.
19
SECTION 13. Parties.
This Agreement shall each inure to the benefit of and be binding upon
the Underwriters, the Fund, the Investment Manager and their respective partners
and successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Fund, the Investment Manager and their respective successors
and the controlling persons and officers and directors referred to in Sections 6
and 7 and their heirs and legal Representative, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters, the Fund, the
Investment Manager and their respective partners and successors, and said
controlling persons and officers, directors and their heirs and legal
Representative, and for the benefit of no other person, firm or corporation. No
purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings.
The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
20
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Underwriters, the Fund and the Investment Manager in accordance with its
terms.
Very truly yours,
Xxxxx & Steers Quality Income Realty Fund,
Inc.
By:
--------------------------------------
Name:
Title:
Xxxxx & Steers Capital Management, Inc.
By:
--------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX INCORPORATED
By: XXXXXXX XXXXX, XXXXXX, XXXXXX & XXXXX
INCORPORATED
By:
-------------------------------
Name:
Authorized Signatory
For itself and as
Representative of the
other Underwriters named
in Schedule A hereto.
21
SCHEDULE A
Number of
Name of Underwriter Shares - Series M7 AMPS
------------------- -----------------------
Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx & Xxxxx
Incorporated ...............
Citigroup Global Markets Inc.
X.X. Xxxxxxx & Sons, Inc.
UBS Securities LLC
Wachovia Capital Markets, LLC
Total ...............................
Sch A-1
SCHEDULE B
XXXXX & STEERS QUALITY INCOME REALTY FUND, INC.
[___] Shares [___]% AMPS, Series M7
Liquidation Preference $25,000 per share
1. The initial public offering price per share for the AMPS,
determined as provided in said Section 2, shall be $25,000.
2. The purchase price per share for the AMPS to be paid by the several
Underwriters shall be $24,750, such discount from the initial public offering
price representing the commission to be paid to the Underwriters for their
commitment hereunder of $250.
3. The initial dividend rate on the AMPS, Series M7 shall be [___]%
per annum.
Sch B-1
Exhibit A
FORM OF OPINION OF FUND'S AND INVESTMENT MANAGER'S
COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 5(b)
With respect to the Fund:
1. The Fund (A) has been duly incorporated and is validly existing and in
good standing as a corporation under the laws of the State of Maryland
with full corporate power and authority to conduct its business as
described in the Registration Statement and the Prospectus and to
enter into and perform its obligations under the Purchase Agreement,
and (B) is duly registered and qualified to conduct its business and
is in good standing in the State of New York (which is the only
jurisdiction identified by management of the Fund to us in which the
Fund owns or leases property or operates or conducts its business);
2. The statements made in the Prospectus under the captions "Description
of Common Shares," insofar as they purport to constitute summaries of
the terms of the Fund's capital stock, constitute accurate summaries
of the terms of the Fund's capital stock in all material respects;
3. All outstanding shares of capital stock of the Fund have been duly
authorized and validly issued by the Fund, and are fully paid and
nonassessable;
4. The Shares have been duly authorized and, when issued and delivered to
the Underwriters against payment therefor in accordance with the terms
of the Purchase Agreement, will be validly issued by the Fund, fully
paid and nonassessable. There are no preemptive rights under federal
or New York law or under the Maryland General Corporation Law to
subscribe for or purchase shares of the Fund's capital stock. There
are no preemptive or other rights to subscribe for or to purchase, nor
any restriction upon the issuance, voting or, transfer of, any shares
of the Fund's capital stock pursuant to the Fund's Charter or Bylaws
except for certain transfer restrictions with respect to the Shares
and with respect to other series of Taxable Auction Market Preferred
Shares ("AMPS") and certain restrictions on the future issuance of
shares of capital stock set forth in the Articles Supplementary and in
the articles supplementary establishing the terms of the other series
of AMPS;
5. The form of the certificates for the Shares conforms to the
requirements of the Maryland General Corporation Law;
6. The Registration Statement and all post-effective amendments, if any,
have become effective under the 1933 Act and, to our knowledge, no
stop order suspending the effectiveness of the Registration Statement
or order pursuant to Section 8(e) of the 1940 Act has been issued and
no proceedings for that purpose are pending before or threatened by
the Commission; and any required filing of the Prospectus pursuant to
Rule 497 of the 1933 Act Rules and Regulations has been made in
accordance with Rule 497;
7. (A) The Purchase Agreement and each of the Advisory Agreement dated as
of February 25, 2002 between the Fund and the Investment Manager (the
"Advisory Agreement"), the Administration Agreement dated as of
February 25, 2002 between the Fund and the Investment Manager (the
"Administration Agreement"), the Master Custodian Agreement dated as
of March 9, 2001 and effective with respect to Fund as of February 15,
2002 between the Fund and State Street Bank and Trust Company (the
"Custodian Agreement"), the agreement dated as of March 12, 2001 and
A-1
effective with respect to Fund as of February 22, 2002 between the
Fund and State Street Bank and Trust Company (the "Sub-Administration
Agreement"), and the Auction Agency Agreement, dated as of September
15, 2003, between the Fund and The Bank of New York (the "Auction
Agency Agreement"; collectively with the Advisory Agreement,
Administration Agreement, Custodian Agreement and Sub-Administration
Agreement, the "Fund Agreements") have been duly authorized, executed
and delivered by the Fund and (B) the Advisory Agreement, assuming
that the Advisory Agreement is the valid and legally binding
obligation of the other parties thereto, is a valid and legally
binding agreement of the Fund, enforceable against the Fund in
accordance with its terms, subject to (i) the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, (ii) to general equitable principles (whether considered in
a proceeding in equity or at law) and (iii) an implied covenant of
good faith and fair dealing, and except as the enforceability thereof
may be limited by considerations of public policy;
8. The issue and sale of the Shares by the Fund and the compliance by the
Fund with the provisions of the Purchase Agreement and the Fund
Agreements will not breach or result in a default under or result in
the creation or imposition of any lien, charge, or encumbrance upon
any property or assets of the Fund pursuant to any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument filed or incorporated by reference as an exhibit to the
Registration Statement, nor will such action violate the Charter,
Articles Supplementary or Bylaws of the Fund or any federal or New
York statute or any rule or regulation thereunder or the Maryland
General Corporation Law or order known to us issued pursuant to any
federal or New York statute or the Maryland General Corporation Law by
any New York or Maryland court or governmental agency or body having
jurisdiction over the Fund or any of its properties;
9. No consent, approval, authorization, order, registration, filing or
qualification of or with any federal or New York governmental agency
or body or any Maryland governmental agency or body acting pursuant to
the Maryland General Corporation Law or, to our knowledge, any federal
or New York court or any Maryland court acting pursuant to the
Maryland General Corporation Law is required for the issue and sale of
the Shares by the Fund and the compliance by the Fund with all of the
provisions of the Purchase Agreement and the Fund Agreements, except
for the registration with the Commission under the 1940 Act of the
Fund as an investment company which has occurred and the registration
of the Shares under the 1933 Act and under the 1940 Act pursuant to
the Registration Statement, which has been filed and has become
effective, and such consents, approvals, authorizations,
registrations, filings or qualifications as have been made or as may
be required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters;
10. To our knowledge, (A) other than as described or contemplated in the
Registration Statement or Prospectus, there are no legal or
governmental proceedings pending or threatened against the Fund, or to
which the Fund or any of its properties is subject, and (B) there are
no agreements, contracts, indentures, leases or other instruments that
are required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
that are not described or filed as required, as the case may be;
11. The statements made in the Prospectus under the captions "Management
of the Fund," "Description of Common Shares," "Description of AMPS,"
"The Auction" and in the Registration Statement under Item 29
(Indemnification), insofar as they purport to constitute summaries of
the terms of the Maryland General Corporation Law or any federal
statutes, rules and regulations thereunder or contracts and other
documents, constitute accurate summaries of the terms of such
statutes, rules and regulations or contracts and other documents in
all material respects;
A-2
12. The statements made in the Prospectus and Statement of Additional
Information under the captions "U.S. Federal Taxation," insofar as
they purport to constitute summaries of matters of United States
federal tax law and regulations or legal conclusions with respect
thereto, constitute accurate summaries of the matters described
therein in all material respects;
13. Each of the Fund Agreements complies as to form with all applicable
provisions of the 1940 Act, the Investment Advisers Act of 1940, as
amended (the "Advisers Act") and the rules and regulations under the
1940 Act and the Advisers Act;
14. The Fund has been duly registered with the Commission under the 1940
Act and the rules and regulations under the 1940 Act (the "1940 Act
Rules and Regulations") as a closed-end, non-diversified management
investment company and, to our knowledge, no order of suspension or
revocation of such registration under the 1940 Act and the 1940 Act
Rules and Regulations has been issued or proceedings therefor
initiated or threatened by the Commission; the provisions of the
Charter, Articles Supplementary and Bylaws do not violate the
provisions of the 1940 Act or the 1940 Act Rules and Regulations; and
the provisions of the Charter, Articles Supplementary and the Bylaws
and the investment policies and restrictions described in the
Registration Statement and the Prospectus under the captions
"Investment Objectives and Policies" and "Risk Factors" and
"Investment Restrictions" (in the Prospectus and the Statement of
Additional Information incorporated by reference therein) comply in
all material respects with the requirements of the 1940 Act and the
applicable 1940 Act Rules and Regulations; and
15. Except as described in the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of, and we
do not know of any commitment, plan or arrangement to issue (other
than in connection with the reinvestment of dividends) any shares of
capital stock of the Fund or any security convertible into or
exchangeable or exercisable for shares of capital stock of the Fund or
to otherwise register such securities for sale.
Insofar as the opinions expressed herein relate to or are dependent
upon matters governed by the laws of the State of Maryland, we have relied upon
the opinion of Xxxxxxx LLP.
We have not independently verified the accuracy, completeness or
fairness of the statements made or included in the Registration Statement or the
Prospectus and take no responsibility therefor, except as and to the extent set
forth in paragraphs 2, 11 and 12 above. In the course of the preparation by the
Fund of the Registration Statement and the Prospectus, we participated in
conferences with certain officers and employees of the Fund and the Investment
Manager, with representatives of PricewaterhouseCoopers LLP and with counsel to
the Investment Manager. Based upon our examination of the Registration Statement
and the Prospectus, our investigations made in connection with the preparation
of the Registration Statement and the Prospectus and our participation in the
conferences referred to above, (i) we are of the opinion that the Registration
Statement, as of its effective date, and the Prospectus, as of its date complied
as to form in all material respects with the requirements of the 1933 Act and
the 1940 Act and the applicable rules and regulations of the Commission
thereunder, except that in each case we express no opinion with respect to the
financial statements or other financial data contained or incorporated by
reference in the Registration Statement or the Prospectus, and (ii) we have no
reason to believe that the Registration Statement, at the time the Registration
Statement became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading or that the Prospectus as of
November [__], 2004 contained, or as of the date hereof contains, any untrue
statement of a material fact, or as of November [__], 2004 omitted, or as of the
date hereof omits, to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that in each case we express no belief with respect
to the financial
A-3
statements or other financial data contained or incorporated by reference in the
Registration Statement or the Prospectus.
With respect to the Investment Manager:
1. The Investment Manager (A) has been duly incorporated and is validly
existing as a corporation under the laws of the State of New York with
full corporate power and authority to conduct its business as
described in the Registration Statement and the Prospectus and (B) is
duly registered and qualified to conduct its business and is in good
standing in the State of New York (which is the only jurisdiction in
which the Investment Manager owns or leases property or operates or
conducts its business).
2. The Investment Manager is duly registered with the Commission as an
investment adviser under the Investment Advisers Act of 1940, as
amended (the "Advisers Act") and is not prohibited by the Advisers
Act, the rules and regulations under the Advisers Act (the "Advisers
Act Rules and Regulations"), the 1940 Act or the rules and regulations
under the 1940 Act from acting under the Advisory Agreement dated as
of June 24, 2003 between the Fund and the Investment Manager (the
"Advisory Agreement"), for the Fund as contemplated by the Prospectus;
and to my knowledge, no order of suspension or revocation of such
registration under the Advisers Act and the Advisers Act Rules and
Regulations has been issued and no proceedings for that purpose are
pending before or threatened by the Commission;
3. Each of the Purchase Agreement and the Advisory Agreement has been
duly authorized, executed and delivered by the Investment Manager and,
the Advisory Agreement, assuming that the Advisory Agreement is the
valid and legally binding agreement of the other parties thereto, is a
valid and legally binding agreement of the Investment Manager,
enforceable against the Investment Manager in accordance with its
terms subject to (i) the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, (ii) by general equitable
principles (whether considered in a proceeding in equity or at law)
and (iii) an implied covenant of good faith and fair dealing, and
except as the enforceability thereof may by limited by considerations
of public policy;
4. Neither the execution, delivery or performance of the Purchase
Agreement or the Advisory Agreement by the Investment Manager or
compliance by the Investment Manager with the provisions of the
Purchase Agreement or the Advisory Agreement nor consummation by the
Investment Manager of the transactions contemplated hereby and thereby
will breach or result in a default under any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Investment Manager is a party or by which its properties are bound
except where breach or default would not reasonably be expected to
have a material adverse effect on the ability of the Investment
Manager to perform its obligations under the Purchase Agreement and
the Advisory Agreement, nor will such action violate the charter or
by-laws of the Investment Manager or any federal or New York statute
or any rules or regulations thereunder or order known to me issued
pursuant to any federal or New York statute by any court or
governmental agency or body having jurisdiction over the Investment
Manager or any of its properties;
5. No consent, approval, authorization, order, registration, filing or
qualification of or with any federal or New York governmental agency
or body or, to my knowledge, any federal or New York court is required
on the part of the Investment Manager for the execution, delivery and
performance by the Investment Manager of the Purchase Agreement and
the Advisory
A-4
Agreement, except such consents, approvals, authorizations, orders,
registrations, filings or qualifications as have been obtained or made
prior to the date hereof;
6. To my knowledge, there are no legal or governmental proceedings
pending or threatened against the Investment Manager, or to which the
Investment Manager or any of its properties is subject, which are
required to be described in the Registration Statement or Prospectus
that are not described as required or which may reasonably be expected
to involve a prospective material adverse change in the ability of the
Investment Manager to perform its obligations under the Purchase
Agreement and the Advisory Agreement.
I have not independently verified the accuracy, completeness or
fairness of the statements made or included in the Registration Statement or the
Prospectus and take no responsibility therefor. In the course of the preparation
by the Fund of the Registration Statement and the Prospectus, I participated in
conferences with certain officers and employees of the Fund and the Investment
Manager, with representatives of PricewaterhouseCoopers LLP and with counsel to
the Fund. Based upon my examination of the Registration Statement and the
Prospectus, my investigations made in connection with the preparation of the
Registration Statement and the Prospectus and my participation in the
conferences referred to above, I have no reason to believe that the Registration
Statement, at the time the Registration Statement became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading or that the Prospectus contains any untrue statement of material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except I express no belief with respect to the financial statements
or other financial data contained or incorporated by reference in the
Registration Statement or the Prospectus.
A-5
